Review project and comment.

P E R D U E FA R M S & S M I T H F I E L D F O O D M E R G E R D E C I S I O N

Prepared by:

Anida Chan, Mark Charpentier, Jourdan Coyle, Carrie Lachance, Will Medley,

Ankita Prakashkumar Patel, Surekha Polisetty, Eric Soucy, and Thea Whalen

Executive Summary

FINANCIAL

Smithfield is too large and expensive for

Perdue to purchase at this time.

BRAND IMAGE

Smithfield clashes with Perdue’s family friendly,

animal-conscious, no antibiotics beliefs

STRATEGIC FIT

Similar product offerings but vastly

different supply chains & product deveopment

DECISION

NO MERGER

Executive Summary

ALTERNATIVE VENTURES

Oil Refining, Soybean Feed & Crusing, Substitute Meat

Products

ALTERNATIVE MERGER

Clara Foods, alternative meat producer, $30

million net worth, on brand with Perdue

DECISION

NO MERGER

Financials

NET WORTH

$6 Billion

NET WORTH

$15 Billion

Financials

NET WORTH

$15 Billion

OWNED BY PARENT

COMPANY NET WORTH

$22.6 Billion

Financials

• Perdue lacks sufficient capital to purchase Smithfield Foods.

• Smithfield generates over double the revenue of Perdue.

• WH Group generates triple the revenue of Perdue.

• WH Group has a strong financial position compared to Purdue.

Brand Image

“FAMILY FRIENDLY FARMING”

• Family Commitment to the Perdue Family, Contracted Family Farmers, Your Family

• Small town family farms across the USA, a “family of family farms”

• First brand to verify “Raised in the USA”

PERDUE VISION

“To be the most trusted name in food and agricultural products”

Brand Image

PERDUE VISION

“Perdue is reflecting consumer sentiment that all animals—including farm animals—should be protected

from pain…” - Josh Balk, Vice President of Farm Animal Protection

at the Humane Society of the United States

“HUMANE ANIMAL PRACTICES”

• Open spaces, idyllic farmhouses, bright sunshine and fluffy chicks

• Windows in 48% of their chicken houses

• No Antibiotics ever used

• Coleman Natural: 1st national retail pork producer to fully implement a crate-free hog environment

• The leader in all-vegetarian-fed and no-antibiotics-ever chicken

• Turkey, pork and USDA certified organic chicken

Brand Image

“TASTE OVER ALL ELSE”

• Highlights on product taste, not family farming

• Product > Animal

• Hunger > Compassion

• Pro use of antibiotics in their animals to control disease, treat disease, prevent disease, and promote growth

• Large International presence, not all animals are “raised in the USA”

• Known international use of crates and containment for farmed animals

Strategic Fit PERDUE OPERATIONS

• 21,000 employees, 2,900 poultry farmers, 8,200 grain farmers, and 900 pork farmers

• Mainly provides poultry, with sub-brands supplying pork and beef products

• 2 main divisions: Perdue Foods & Perdue AgriBusiness

Raising animals needed to produce food products, farming practices,

animal welfare

Sourcing, processing, & selling agricultural commodities, management of imports, exports, and & grain storage facilities

Strategic Fit SMITHFIELD OPERATIONS

• 54,900 employees, 45 processing plants, 460 Hog Production farms (not including contractor farms and joint ventures)

• World’s largest pork processor and hog producer, producing 20.6 million market hogs annually

• Over 40 brands of products in the Smithfield line alone, not including WH Group companies

Strategic Fit

• Perdue would likely be limited in their decision-making abilities given the difference in their size and financials, if a merger with Smithfield Foods occurs.

• Smithfield Foods would be likely be the lead in decision making, considering their size and financials.

• Management and Operational Fit do not align (different processes, can clash).

Alternative Ventures SOYBEAN GROWTH: • 180% growth from 2004-2014 • Forecasting additional 129% growth 2014-2024 • 45% of total soybeans sent to crush plants • 34% global oil seed volume from US

Benefits to Acquiring over Building Soybean Plant: • Reduce startup costs by acquiring specialized equipment • Market competition growing due to crushing productivity • Quicker Return on Investment • Additional value in having a plant available in the

heartland near consumer base

Projected Costs vs. Revenue • For a plant that can process 200 tons of soybeans per

day, comparable operations costs are $733 million with revenue into the billions

• Product versatility – domestic and international potential

Alternative Ventures

• Livestock #s increasing world-wide, need for feed is also increasing

• Soybean crushing, refining, and trading is thriving in US agribusiness

• Perdue Agribusiness currently owns 4 crush plants/refineries along the east coast

• Acquiring a 5th plant in the Midwest increases holdings and opportunities for Pacific coast international trade

• Besides feed, soybeans can be refined and sold as cooking oil and biodiesel

IDENTIFIED MARKET:

SOYBEAN CRUSHING & REFINING

Why Invest in Alternative Meat? DIVERSIFICATION Perdue is facing market pressure to diversify by investing in meatless

companies and products

ENVIRONMENTALLY- Meat alternatives do not cause major greenhouse gas emissions FREINDLY (unlike cows and pigs)

ANIMAL-FRIENDLY Meatless alternatives do no rely on factory farming

GROWING MARKET The domestic market (i.e., American market) is increasingly turning to vegetarian foods

Alternative Merger

IDENTIFIED COMPANY:

FOUNDED: 2015

LOCATION: San Francisco, CA

SIZE: <50 Employees

NET WORTH: Est. $30 - $60 million

“creating the first ever, animal-free egg protein, which foams, gels and binds similarly to traditional egg whites.”

Alternative Merger

FINANCIAL

Annual Revenue $4 million Valuation ~30 - $60 million

Series B Fund ~$7 - $10 million

PARTNERSHIP

Need extended research on Series B finacier – is there a

partnership or responsibility?

PATENT & LICENSES

Patent pending for specific eggwhite-like proteins, processes, and recipes

Alternative Merger

CUSTOMER APPROVAL

Research consistently shows consumer’s increasing interest

and want for meat-less, healthy products

STRATEGIC FIT

Both provide protein food sources, dedication to

sustainability and organics, humane practices

DISASTER RECOVERY

On opposite coasts of US, preventing total operations

shut down due to disaster or weather

References Anchel, D., (2014) US Patent Application No. 62,078,385

Company News; Perdue Farms to Explore Merger with Showell. (2019). Available at https://www.nytimes.com/1994/11/17/business/company-news-perdue-farms-to-explore-merger-with- showell.html

Corporate Profile. (n.d.). Retrieved from http://www.wh-group.com/html/about.php

Environment: Perdue Farms. (n.d.). Retrieved July 29, 2019, from https://www.perduefarms.com/responsibility/environment/

Hall, C, and Astrachan, J. (April 27, 2015). Study: customers really do trust family business more. Harvard Business Review. Retrieved from (https://hbr.org/2015/04/study-customers-really-do-trust- family-businesses-more

Jacobs, H. (2014, December 10). Perdue Farmer Reveals How Bad Life Is for His 'Humanely Raised' Chickens. Retrieved from https://www.businessinsider.com/the-truth-about-humanely-raised- chicken-2014-12

McGowan, E. (2018, May 3). Series A, B, C, D, and E Funding: How It Works. Retrieved July 27, 2019, from https://www.startups.com/library/expert-advice/series-funding-a-b-c-d-e

Perdue Farms Competitors, Revenue and Employees - Owler Company Profile. (2019). Available at https://www.owler.com/company/perduefarms

Perdue Farms on the Forbes America's Best Employers by State List. (n.d.). Retrieved from https://www.forbes.com/companies/perdue/#171b1e40c7ca

Perdue. (2018a). Position statement on animal care and welfare. Retrieved from https://www.perduefarms.com/news/statements/position-statement-on-animal-care-and-welfare/

Perdue. (2018b). Perdue at a glance. Retrieved from https://www.perduefarms.com/media/2110/about-perdue-dec-2018-update.pdf

References Perdue. (n.d.). Our legacy. Retrieved from https://www.perduefarms.com/company/legacy/

Perdue Foods Launches CHICKEN PLUS™ With Vegetable Nutrition: Perdue Farms. (2019, June 12). Retrieved July 28, 2019, from https://www.perduefarms.com/news/press-releases/perdue-foods- launches-chicken-plus-with-vegetable-nutrition-new-chicken-nuggets-tenders-and-patties-meet-demand-for-flexitarian-families/

Rowland, M. P. (2019, April 25). Clara Foods Secures Series B Financing Led by Ingredion, Fast-Tracking Animal-Free Protein Development. Retrieved July 29, 2019, from https://www.forbes.com/sites/michaelpellmanrowland/2019/04/25/clarafoods/#d77c9cb7b637

Smithfield. (n.d.). About Smithfield. Retrieved from https://www.smithfieldfoods.com/about-smithfield

Smithfield Foods. (2018a). Antibiotics use. Retrieved from https://www.smithfieldfoods.com/sustainability/report/2018/animal-care/antibiotics-use

Smithfield Foods. (n.d.). About Smithfield. Retrieved from https://www.smithfieldfoods.com/about-smithfield

Smithfield Foods. (2018b). Smithfield Foods at a glance. Retrieved from https://www.smithfieldfoods.com/sustainability/report/2018/smithfield-foods-at-a-glance

Smithfield Closes Major Meat Facility After $400 Million Lawsuit. (2018, September 10). Retrieved from https://mercyforanimals.org/smithfield-closes-major-meat-facility-after

Smithfield Competitors, Revenue and Employees - Owler Company Profile. (n.d.). Retrieved from https://www.owler.com/company/smithfieldfoods

Vucolo, Alex. (June 19,2019). Perdue shares insights into 4th generation family dynamics. Delaware Business Times. Retrieved from https://www.delawarebusinesstimes.com/perdue-farms-shares- insights/

Waite, R. (2018, January 24). 2018 Will See High Meat Consumption in the U.S., but the American Diet is Shifting. Retrieved July 29, 2019, from https://www.wri.org/blog/2018/01/2018-will-see-high- meat-consumption-us-american-diet-shifting